1. International Business
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International Business
Globalization

2. Chapter 1
Globalization

3. Three Kinds of Companies
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Three Kinds of Companies
Those companies which make things happen
Those companies which watch things happen
Those companies which wonder what things happened
-- Michael E.Porter

4. Chapter Preview Describe globalization
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Chapter Preview
Describe globalization
Explain how globalization affects markets and production
Discuss the globalization debate
Identify the drivers of globalization
The Changing Demographics of the Global Economy
Managing in the Global Marketplace
International Business Environment

5. w w w . e p o w e r p o i n t. c o m
What Is Globalization?
The world is moving away from self-contained national economies toward an interdependent, integrated global economic system
Globalization refers to the shift toward a more integrated and interdependent world economy
Globalization has two facets:
1) the globalization of markets
2) the globalization of production

6. w w w . e p o w e r p o i n t. c o m
Globalization
Trend toward greater economic, cultural, political, and technological interdependence among national institutions and economies
Globalization of markets
Convergence in buyer preferences in markets around the world
Globalization of production
Dispersal of production activities worldwide to minimize costs or maximize quality

7. The Globalization Of Markets
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The Globalization Of Markets
The globalization of markets refers to the merging of historically distinct and separate national markets into one huge global marketplace.
In many industries, it is no longer meaningful to talk about the “German market” or the “American market”.
Instead, there is only the global market.
The globalization of markets refers to the merging of historically distinct and separate national markets into one huge global marketplace.
It is important to recognize that significant differences still exist among national markets, requiring companies to customize market strategies, product features, and operating practices to meet the conditions in particular markets.
The most global markets currently are not markets for consumer products—where national differences in tastes and preferences are still often important enough to act as a brake on globalization—but markets for industrial goods and materials that serve a universal need the world over.
These include the markets for commodities such as aluminum, oil, and wheat; the markets for industrial products such as microprocessors, DRAMs (computer memory chips), and commercial jet aircraft; the markets for computer software; and the markets for financial assets from U.S. Treasury bills to Eurobonds and futures on the Nikkei index or the Mexican peso.

8. The Globalization Of Markets
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The Globalization Of Markets
Falling trade barriers make it easier to sell internationally;
The tastes and preferences of consumers are converging on some global norm;
Firms help create the global market by offering the same basic products worldwide.
In many markets the emergence of a global marketplace has begun to occur.
There are three causes: falling barriers to cross-border trade have made it easier to sell internationally; tastes and preferences are converging on some global norm helping to create a global market; and firms are facilitating the trend by offering standardized products worldwide creating a global market.

9. Globalization Competition
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Globalization Competition
Competition continues to increase in intensity.
Companies are defending their home markets from competitors by entering the competitors’ home markets to distract them.

10. Competition between Coca-Cola and PepsiCo
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Competition between Coca-Cola and PepsiCo
题库和案例\【百事可乐】VS【可口可乐】之广告决斗【陈照】.avi

11. Characteristics of Global Competition
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Characteristics of Global Competition
International competition is here at home. You are an
international trader no matter where you are.
Transnational Corporations are getting stronger in world
economy GDP of TNC accounting for 40% of the world；trade 60% ；FDI 90%.
Each company is facing the survival and development in the
global competition.

12. Companies Should Do in Global Context?
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Companies Should Do in Global Context?
Making optimization of global resources allocation, and Making optimization of global markets.
* Thinking globally, doing locally.

13. Cases and discussions Page 1 in the text book:
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Cases and discussions
Page 1 in the text book:
Flat Panel Televisions and the Global Economy
Discussions: How did these companies do while
facing the global competition? What do you think
about the globalization?

14. The Globalization Of Production
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The Globalization Of Production
The globalization of production refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production like land, labor, and capital
Companies compete more effectively by lowering their overall cost structure or improving the quality or functionality of their product offering
The globalization of production refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (such as labor, energy, land, and capital).
By doing this, companies hope to lower their overall cost structure and/or improve the quality or functionality of their product offering, thereby allowing them to compete more effectively.
Early outsourcing efforts were primarily confined to manufacturing enterprises, but today, more companies are taking advantage of modern communications technology, like the Internet, to outsource service activities to low-cost producers in other nations.
The Country Focus: Outsourcing American Healthcare illustrates how the Internet has allowed hospitals to outsource some radiology work to India, where images from MRI scans and the like are read at night while U.S. physicians sleep, and are the results are ready for them in the morning.
There are still substantial impediments to the globalization of production including formal and informal barriers to trade, barriers to foreign direct investment, transportation costs, issues associated with economic risk, and issues associated with political risk.

15. The Globalization Debate
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The Globalization Debate
Is the shift toward a more integrated and interdependent global economy a good thing?
Supporters believe that increased trade and cross-border investment mean lower prices for goods and services, greater economic growth, higher consumer income, and more jobs.
Critics worry that globalization will cause job losses, environmental degradation, and the cultural imperialism of global media and MNEs.

16. Anti-Globalization Protests
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Anti-Globalization Protests
More than 40,000 anti-globalization protesters took to the street at the WTO meeting in Seattle in 1999.
Protesters now regularly show up at most major meetings of global institutions.
The Country Focus: Protesting Globalization in France feature describes the anti-globalization protests going on in France. The protests, led by activist Jose Bove, started when the U.S. retaliated against EU bans on beef imports by imposing a 100% tariff on some EU products. Bove and his associates targeted McDonald’s, and also California winemaker Mondavi as symbols of their opposition to American investments. Still, despite the protests, foreign investment in France is at record highs, and ironically, so are French investments abroad.

17. Globalization – Pro Lower prices for goods and services.
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Globalization – Pro
Lower prices for goods and services.
Economic growth stimulation.
Increase in consumer income.
Creates jobs.
Countries specialize in production of goods and services that are produced most efficiently.

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Globalization – Cons
Destroys manufacturing jobs in wealthy, advanced countries.
Wage rates of unskilled workers in advanced countries declines.
Companies move to countries with fewer labor and environment regulations.
Loss of sovereignty.

19. Globalization, Jobs, And Income
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Globalization, Jobs, And Income
Globalization critics argue that falling barriers to trade are destroying manufacturing jobs in advanced countries.
Supporters of globalization contend that the benefits of this trend outweigh the costs—that countries will specialize in what they do most efficiently and trade for other goods—and all countries will benefit.

20. Globalization, Labor Policies, And The Environment
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Globalization, Labor Policies, And The Environment
Globalization critics argue that firms avoid costly efforts to adhere to labor and environmental regulations by moving production to countries where such regulations do not exist, or are not enforced.
Globalization supporters claim that tougher environmental and labor standards are associated with economic progress, so as countries get richer from free trade, they get tougher environmental and labor regulations.

21. Globalization And National Sovereignty
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Globalization And National Sovereignty
Critics of globalization worry that today’s interdependent global economy is shifting economic power away from national governments toward supranational organizations like the WTO, the EU, and the UN.
Supporters of globalization contend that the power of these organizations is limited to what nation-states agree to grant, and that the power of the organizations lies in their ability to get countries to agree to follow certain actions.

22. Globalization And The World’s Poor
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Globalization And The World’s Poor
Critics of globalization argue that the gap between rich nations and poor nations is getting wider.
Supporters of globalization claim that the best way for the poor nations to improve their situation is to reduce barriers to trade and investment and implement economic policies based on free market economies, and to receive debt forgiveness for debts incurred under totalitarian regimes.

23. Globalization Drivers 1
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Globalization Drivers 1
Regional trade
agreements
GATT
WTO
Remove barriers to trade
and investment

24. The Emergence Of Global Institutions
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The Emergence Of Global Institutions
Institutions are needed to:
help manage, regulate, and police the global marketplace
promote the establishment of multinational treaties to govern the global business system

25. The Emergence Of Global Institutions
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The Emergence Of Global Institutions
Institutions created over the past half century include:
the General Agreement on Tariffs and Trade (GATT)
the World Trade Organization (WTO)
the International Monetary Fund (IMF)
the World Bank
the United Nations (UN)

26. The Emergence Of Global Institutions
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The Emergence Of Global Institutions
The World Trade Organization (like its predecessor GATT) is primarily responsible for policing the world trading system and making sure that nation-states adhere to the rules laid down in trade treaties signed by WTO members.
In 2007, the 150 nations that accounted for 97% of world trade were WTO members.
The WTO promotes lower barriers to trade and investment.

27. The Emergence Of Global Institutions
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The Emergence Of Global Institutions
The International Monetary Fund and the World Bank were created in 1944.
The IMF was established to maintain order in the international monetary system.
The World Bank was established to promote economic development.

28. INTERNATIONAL MONETARY FUND (IMF)
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INTERNATIONAL MONETARY FUND (IMF)
Objectives to:
1) promote exchange rate stability.
2) facilitate expansion & balanced growth in IB.
3) avoid competitive currency devaluations.
4) establish multilateral system of payments.
5) make funds available to members to stabilize currency...
6) create standby reserves. (more later)

29. w w w . e p o w e r p o i n t. c o m
WORLD BANK
The International Bank for Reconstruction and Development (a.k.a. The World Bank)
Organized in 1945 by major Western gov’ts
Original purpose was to aid the rebuilding of the war torn countries of WW2, but focus shifted to developing countries.

30. WORLD BANK (cont’d) Has three arms:
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WORLD BANK (cont’d)
Has three arms:
1) the Bank itself which makes hard loans to sound borrowers at prevailing interest rates for periods not exceeding 25 years.
2) the International Finance Corp.(IFC) is the investment banker which encourages the growth of productive enterprises in Lesser Developed member Countries (LDC’s).
3) the International Development Assoc.(IDA) makes soft loans to LDC’s where the per capita income does not exceed $765. Loans are repayable in as long a term as 40 years with often no interest charges. Funds are donated by DC’s and some LDC’s.

31. The Emergence Of Global Institutions
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The Emergence Of Global Institutions
The United Nations was established in 1945 to:
maintain international peace and security
develop friendly relations among nations
cooperate in solving international problems and in promoting respect for human rights
be a center for harmonizing the actions of nations
Two major bodies are the General Assembly and the Security Council

32. w w w . e p o w e r p o i n t. c o m
GENERAL ASSEMBLY
A deliberative body composed of all member countries, each with one, equal vote, no matter size, power, or wealth.
Mandate has shifted to raising incomes of less developed countries (LDC’s)

33. - 10 chosen members who sit for 2 year terms.
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SECURITY COUNCIL
Made up of 15 members:
- 5 permanent (US, China, Russia, France and the UK) each of which have absolute veto power
- 10 chosen members who sit for 2 year terms.

34. THE ORGANIZATION For ECONOMIC CO-OPERATION And DEVELOPMENT (OECD)
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THE ORGANIZATION For ECONOMIC CO-OPERATION And DEVELOPMENT (OECD)
30 member countries that serve to promote economic co-ordination between Western Industrialized countries.
Primary focus is economic research.
Based in Paris, have been working to craft a treaty called the Multinational Treaty on Investment.

35. Globalization Drivers II: Declining Trade And Investment Barriers
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Globalization Drivers II: Declining Trade And Investment Barriers
International trade occurs when a firm exports goods or services to consumers in another country
Foreign direct investment (FDI) occurs when a firm invests resources in business activities outside its home country
After World War II, advanced countries made a commitment to lower barriers to trade and investment
Since 1950, average tariffs have fallen significantly and are now at about 4%
Countries have also been opening markets to FDI
International trade occurs when a firm exports goods or services to consumers in another country.
Foreign direct investment (FDI) occurs when a firm invests resources in business activities outside its home country.
After World War II, advanced industrial nations of the West committed themselves to removing barriers to the free flow of goods, services, and capital between nations.

36. Declining Trade And Investment Barriers
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Declining Trade And Investment Barriers
Table 1.1: Average Tariff Rates on Manufactured Products as Percent of Value

37. Declining Trade And Investment Barriers
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Declining Trade And Investment Barriers
Lower barriers to trade and investment mean:
that firms can view the world, rather than a single country, as their market
that firms can base production in the optimal location for that activity

38. Globalization Drivers III Technological Innovation
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Globalization Drivers III Technological Innovation
and videoconferencing
Internet, intranets,
and extranets
Transportation
advancements
Better coordination and control
Improved communications and management
More efficient, dependable shipping

39. The Role Of Technological Change
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The Role Of Technological Change
Technological change has made the globalization of markets a reality.
Important advances have occurred in:
microprocessors and telecommunications;
the Internet and World Wide Web;
transportation technology.
The lowering of trade barriers made globalization of markets and production a theoretical possibility, technological change made it a tangible reality.
Microprocessors and Telecommunications: Major advances in communications and information processing have lowered the cost of global communication and therefore the cost of coordinating and controlling a global organization.
The Internet and the World Wide Web: Web-based transactions have grown from virtually zero in 1994 to nearly $7 trillion in 2004.
Transportation Technology: the most important developments are probably development of commercial jet aircraft and super freighters and the introduction of containerization, which greatly simplifies trans-shipment from one mode of transport to another.
Improvements in transportation technology have enabled firms to better respond to international customer demands.
Managers today operate in an environment that offers more opportunities, but is also more complex and competitive than that of a generation ago.

40. The Role Of Technological Change
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The Role Of Technological Change
Implications of technological change for the globalization of production include:
lower transportation costs that enable firms to disperse production to economical, geographically separate locations;
lower information processing and communication costs that enable firms to create and manage globally dispersed production systems.

41. The Role Of Technological Change
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The Role Of Technological Change
Implications of technological change for the globalization of markets include:
low cost global communications networks help create electronic global marketplace;
low-cost transportation help create global markets;
global communication networks and global media are creating a worldwide culture, and a global market for consumer products.

42. The Changing Demographics Of The Global Economy
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The Changing Demographics Of The Global Economy
There has been a drastic change in the demographics of the world economy in the last 30 years.
Four trends are important:
the Changing World Output and World Trade Picture;
the Changing Foreign Direct Investment Picture;
the Changing Nature of the Multinational Enterprise;
the Changing World Order.

43. The Changing World Output And World Trade Picture
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The Changing World Output And World Trade Picture
In 1960, the United States accounted for over 40% of world economic activity.
By 2006, the United States accounted for less than 20% of world economic activity.
A similar trend occurred in other developed countries.
The share of world output accounted for by developing nations is rising and is expected to account for more than 60% of world economic activity by 2020.
In the 1960s: the U.S. dominated the world economy and the world trade picture, U.S. multinationals dominated the international business scene, and about half the world-- the centrally planned economies of the communist world-- was off limits to Western international business.

44. w w w . e p o w e r p o i n t. c o m
Trade Exceeds Output

45. The Changing World Output And World Trade Picture
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The Changing World Output And World Trade Picture
Table 1.2: The Changing Demographics of World GDP and Trade
The Country Focus: India’s Software Sector feature explores the growth of India’ software sector over the last twenty-five years. Four factors account for the growth of the sector. First, the country has a large supply of engineers. Second, labor costs in India are low. Third, since many Indians are fluent in English, coordination between Western firms and Indian firms is easier. Fourth, because of time differences, Indians can work while Americans sleep.

46. The Changing Foreign Direct Investment Picture
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The Changing Foreign Direct Investment Picture
In the 1960s, U.S. firms accounted for about two-thirds of worldwide FDI flows.
Today, the United States accounts for less than one-fifth of worldwide FDI flows.
Other developed countries have followed a similar pattern.
In contrast, the share of FDI accounted for by developing countries has risen from less than 2% in 1980 to almost 12% in 2005.
Developing countries, especially China, have also become popular destinations for FDI.
The share of world output generated by developing countries has been steadily increasing since the 1960s.
The stock (total cumulative value of foreign investments) generated by rich industrial countries has been on a steady decline.
There has been a sustained growth in cross-border flows of foreign direct investment.
The flow of foreign direct investment (amounts invested across national borders each year) has been directed at developing nations especially China.

47. The Changing Foreign Direct Investment Picture
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The Changing Foreign Direct Investment Picture
Figure 1.2: Percentage Share of Total FDI Stock
This slide offers a definition for globalization; it highlights that globalization affects two primary areas.

48. The Changing Foreign Direct Investment Picture
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The Changing Foreign Direct Investment Picture
Figure 1.3: FDI Inflows
This slide offers a definition for globalization; it highlights that globalization affects two primary areas.

49. The Changing Nature Of The Multinational Enterprise
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The Changing Nature Of The Multinational Enterprise
A multinational enterprise (MNE) is any business that has productive activities in two or more countries.
Since the 1960s, there has been a rise in non-U.S. multinationals, and a growth of mini-multinationals.
A multinational enterprise is any business that has productive activities in two or more countries.
Expect the growth of new multinational enterprises (any business that has productive activities in two or more countries) from the world's developing nations.
The number of mini-multinationals (small and medium-sized companies) is on the rise.

50. The Changing World Order
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The Changing World Order
Many former Communist nations in Europe and Asia are now committed to democratic politics and free market economies and so, create new opportunities for international businesses.
China and Latin America are also moving toward greater free market reforms.
The Management Focus: China’s Hisense – An Emerging Multinational examines how one Chinese company, Hisense, has emerged as one of China’s premier makers of televisions, air conditioners, refrigerators, personal computers, and telecommunications. Hisense began as a state-owned company in 1969, but became a private corporation in Today, the company has sales of $3.3 billion, and has sets its sights on becoming a global enterprise with a world class consumer brand. Hisnese believes its core strength lies with its ability to rapidly innovate.
Teaching Tip: To find out more about Hisense, visit the company’s web site at {

51. The Global Economy Of The Twenty-first Century
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The Global Economy Of The Twenty-first Century
The world is moving toward a more global economic system, but globalization is not inevitable.
Globalization also brings risks like the financial crisis that swept through South East Asia in the late 1990s.

52. Managing In The Global Marketplace
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Managing In The Global Marketplace
An international business is any firm that engages in international trade or investment.

53. International Business Players
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International Business Players
Business that has direct investments abroad in multiple countries
Small companies and individuals becoming increasingly active in international trade and investment
Takes a global perspective on its market and engages in international business from inception
Multinational
Corporation
Small Businesses
and Entrepreneurs
Born-Global Firm

54. Managing In The Global Marketplace
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Managing In The Global Marketplace
Managing an international business differs from managing a domestic business because:
countries are different;
the range of problems confronted in an international business is wider and the problems more complex than those in a domestic business;
firms have to find ways to work within the limits imposed by government intervention in the international trade and investment system;
international transactions involve converting money into different currencies.

55. Global Business Environment
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Global Business Environment